Amazon and Microsoft Under Investigation: Set to Face Cloud Computing Competition Probe

Amazon and Microsoft are under investigation by Britain’s anti-competition regulators over their dominance of the cloud computing market. On Thursday, media watchdog Ofcom said the Competition and Markets Authority would kickstart further investigation into the process.

The investigation comes after telecommunications regulator Ofcom studied issues concerning cloud computing and found proof that key players such as Amazon and Microsoft made it difficult for customers to use multiple suppliers or switch. 

The two companies are known to be key providers of essential remote storage and computing, which is now dominant across various businesses.

Ofcom said that the features it identified made it difficult for U.K. businesses to switch cloud providers or use multiple cloud services. The regulator said it is “particularly concerned” about the position of Amazon and Microsoft.

Fergal Farragher, the director responsible for the market study, said,

• Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud providers, and it’s not clear that the competition is working well.

• So, we’re referring the market to the CMA for further scrutiny to make sure business customers continue to benefit from cloud services.

Ofcom is worried that companies like Amazon Web Services and Microsoft Azure are reducing competition in the cloud market. These companies allow all stripes to carry out critical computing tasks such as the management and storage of data, analytics, intelligence, and the delivery of content over the internet through servers stored on-site.

Speaking on the issue, an Amazon spokesperson said on Thursday that the company disagrees with the Ofcom findings, citing “a fundamental misconception of how the IT sector functions and the services and discounts on offer”.

A Microsoft spokesperson, on the other hand, said, “We will engage constructively with the CMA”.

Amazon Web Services (AWZ) and Microsoft Azure are the two biggest cloud computing players in the market. AWZ cloud solutions are targeted at startups, while Microsoft works with big firms. According to an Ofcom estimate, AWS and Microsoft Azure account for between 60% and 70% of cloud spend. Ofcom also reported that Amazon, Microsoft, and Google generate close to 81% of the U.K. cloud infrastructure service market, which should be between £15 billion ($18.2 billion).

Addressing the issue, the CEO of CMA, Sarah Cardell, said,

• Many businesses now completely rely on cloud services, making effective competition in this market essential.

• Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players, unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.

The CMA’s market investigations will last for 18 months, while the agency has the right to impose structural remedies such as selling part of the business to increase competition if issues are found.